Growth in the eight core sectors of the economy fell marginally to 5.1 per cent in May, down from a revised 6.3 per cent in April, with electricity generation and steel production picking up the slack for sectors experiencing low or negative growth.
Data released by the commerce and industry ministry on Monday showed that coal, crude oil, natural gas, refinery products, fertiliser, steel, cement, and electricity industries saw growth take a moderate hit in May after a pickup in April. April’s growth figures were estimated at 2.6 per cent earlier.
The revision was due to inclusion of a product called HRPO under the item ‘CR coils’. Contributing almost 40 per cent to the country’s total industrial production, output of the core sector weakened for four straight months at the end of the last fiscal year. As a result, annual growth stood at 4.3 per cent in FY19, the same as the previous year. But since that, the second and third largest sectors in the index — electricity generation and steel production — have seen steady growth.
Steel output growth was high at 19.9 per cent in May, even higher than the 19 per cent rise in April. Another sector that indicates the health of construction and infra development — cement — saw production rise by 2.8 per cent, up from 2.3 per cent in April. Growth had tapered off after hitting a 11-month high of 15.7 per cent in March.
The electricity sector saw growth rise to 7.2 per cent, up from 5.9 per cent in April. Growth in the electricity sector had dipped to its lowest point in the last 71 months in January. A low growth in coal output had been blamed then. However, growth has steadily risen since then.
In the energy space, lower prices continued to impact crude oil production as well as exports of refinery products. Crude oil production went down by 6.7 per cent in April, the highest margin of contraction in the past 12 months. Consequently, refinery products, which command almost 30 per cent of the core sector index, contracted by 1.5 per cent in May, after 2 months of growth since March. It had then broken a contractionary spell that had gripped the sector since December 2018. Coal output growth also lost pace, rising by only 1.8 per cent in May.
Production had hit a hit of 9.1 per cent in March, but only 3.2 per cent in April. “Coal and power have done relatively better, which is a good sign. This also means that the index of industrial production growth or IIP growth will be subdued in the range of 2-2.5 per cent. Government infra spending in the first quarter would be low key and this will drive core sector growth in the coming month,” Madan Sabnavis, chief economist at CARE Ratings, said.
Fertiliser production went down by 1 per cent in May, after a contraction of 4.3 per cent in the previous month. The sector had bounced back in January after three months of fall.